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Hi, you guys,
I'm learning about transferable L/C to prepare for CDCS examination. I have some question to be explained as follow, Pls give me your advice.

1. Why is it said that ” Failure of the 1st beneficiary to substitute or to correct discrepant documents on first demand is the risk that an issuing bank and applicant take in issuing a transferable credit. “. You can help me explain this statement. I think an issuing bank and applicant take in issuing a transferable credit do not take any risk in a such case?

2. If a transferable credit has been confirmed, whether the transferred credit has also been confirmed or not?, what will be considered for transferred credit’s confirmation?

3. If a transferable L/C is available with payment/negotiation/acceptance/incur deferred payment undertaking by ABC bank, so ABC bank is also specially nominated as a transfering bank without a separate instruction about transferring bank’s name in MT700, is it right?

4. Substitution for documents of first beneficiary must be approved by transfering bank in all circumstances, is it right, i.e Which documents are substituted and how is substituted?

5. If any amendment incurred with a transferred L/C, it is necessary to notify issuing bank and applicant? I think NO, is it right? And what should party give approval for such a amendment?

If any amendment incurred with a transferable L/C, when was it notified to 2nd ben, when was it not notified 2nd ben?

6. When has a tranfer back to 1st beneficiary from 2nd beneficiary? Can I consider that this transferred L/C has been ruined in a such case?

Beside, do you have any material or ICC insight relating to transferable L/C?. I'm very grateful if you can share with me, my email: ngoaithuong91(at) gmail.com .

What are things which are not provided by UCP600 I should know about transferable L/C?

Transferable L/C is really mystery for me. It seem to be practiced under banking's custom rather than UCP rule

Thank you

Hi,

1.In the event of failure of presentation from the 1st beneficiary, transferring bank has to present credit complied documents received from the 2nd beneficiary to issuing bank to get payment. Profit margin of the 1st beneficiary would be settled outside the LC. This statement cover the situation issuing bank has to honor an Invoice that is not as per their expectation covered in the LC. In a nutshell, Issuing bank is making payment basis an Invoice which shows contradict information in the master LC as it is presented from the 2nd beneficiary, You can see difference in the unit price and total amount and applicant name and beneficiary name.

2.Yes, if transferring banks is adding confirmation then it is applicable to transferred credit too. The intention is not 2nd Beneficiary bank adds confirmation or confirmation is applicable only for the 1st Beneficiary.

3.yes
4.Transferring bank is no obligation to transfer a credit. If transferring agrees to transfer the credit, it must conclude a separate agreement referred by you.
5.Question is not clear.(please write it clearly , will help you)
6.Question is not clear.(please write it clearly, will help you)

Thanks & Regards
Dinesh Kumar

Hi Pals,

Question 5, amendment may be advised to II° beneficiary directly or not, depending on the first beneficiary instructions given to transferring bank.
Question 6, transfer back is possible from second beneficiary to first beneficiary, the latter may transfer to a new beneficiary this portion. I observed that a second beneficiry transferred back an amount and the first beneficiary instructed the transferring bank to reallocate this l/c portion.
Remember that in many cases, first beneficiary is an Agent of the buyer and uses the l/c to buy goods in the best way.

It is very interesting the document no. 470/977 rev 3 dd 30.10.2002 free downlable from
www.iccwbo.org , created under UCP 500 it seems to be useful now too.
Ciao

Thank you, picant. I have an other question need to be clarified.
In case, transferred lc is available with honor/nego by a bank in 1st ben, the substitution will occur before or after expired date?. I have ever asked Mr Gary Collyer, but he answer generally that the substitution can occur before or after expired date, which depends on expired date, not giving specific answer: how does it depend on expired date?

Hi Pal,

quick reply: substitution must be made by first beneficiary as per originary l/c terms.
Ciao